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Moleskine to Test Appetite for Italian IPOs

Investors are keenly watching the debut of Moleskine, which is only the third company to go public in Milan since early 2011.
Moleskine

By

Manuela Mesco

March 18, 2013 1:42 p.m. ET

MILAN—A small maker of diary and other stationery products is about to test investors' willingness to look past Italy's political impasse and struggling economy.

Moleskine SpA, a maker of elegantly bound notebooks modeled on those used by novelists' Bruce Chatwin and Ernest Hemingway, said it is forging ahead with a €500 million ($654 million) initial public offering that in recent years has become a rare event in troubled southern Europe.

While the stock market rally has prodded companies in Northern Europe to go public—sparking hopes of a new wave of listings later this year—the surge has largely skipped the southern part of the continent. Investors are keenly watching the debut of Moleskine, which is only the third company to go public in Milan since early 2011 and among a very few that have made the move in southern Europe.

On Monday, Syntegra Capital, a European-based private-equity firm that bought a majority stake in Moleskine in 2006, said it would sell about 106 million shares at a price ranging between €2 and €2.65 apiece. A sale would value the company at as much as €562 million. Most of the offering's proceeds would go toward reducing the company's debt. Trading is expected to start on April 3.

Moleskine

Marco Ariello, partner at Syntegra, said on Monday the decision to go public was made despite the current political uncertainty in Italy—the country remains without a government a month after national elections—because the owners felt Moleskine's growth prospects would override any volatility in Italian markets.

Moleskine makes about 90% of its sales outside Italy and plans to grow by opening more retail shops around the world, especially in Asia and America. It also plans to expand its range of products by producing travel goods.

In the first nine months of 2012, Moleskine reported net profit of €14.2 million compared with €11.6 million for the same period in 2011, according to its registration document. Revenue was €56.63 million compared with €50.99 million a year earlier.

About half of its sales came from Europe and more than a third came from the Americas, the company reported.

The offering comes as businesses face the possibility of a new flare-up of the euro-zone debt crisis. After an inconclusive election last month, Italy risks remaining without a government for weeks more or even returning to the polls. The Italian stock market lost 0.9% Monday on tensions surrounding the bailout of Cyprus.

Nonetheless, Moleskine hopes to replicate the market success of leather-goods maker
Salvatore Ferragamo
SpA and cashmere group
Brunello Cucinelli
SpA, two other Italian companies that have gone public since 2011 on Milan's main stock market. Milan-based fashion heavyweight
Prada
SpA snubbed Italy in favor of Hong Kong when it went public in 2011.

Shares in Ferragamo and Brunello Cucinelli have more than doubled since their offerings, reflecting their strong growth in non-European markets such as Asia. But Moleskine's smaller size and less exclusive product lines may make it a harder sell, bankers say.

Northern Europe has a steady flow of IPOs despite the European crisis. Since 2011, London's main exchange has had 52 offerings, while Frankfurt has had 20 IPOs in the stock exchange's major business. Ernst & Young expects a new wave of IPOs to take off globally in 2013, with 15 already launched in Europe this year and a further 11 slated by the end of March.

But the bulk of it comes from Germany, the U.K. and Scandinavia, and the wave may not reach Europe's troubled south this year. "There might be more activity [in southern Europe] only toward the end of 2014," says Maria Pinelli, global vice chair for strategic growth markets at Ernst & Young.

The dearth of IPO activity has choked off a source of new capital for promising smaller companies while also throwing a wrench into plans for many private-equity firms to exit investments made in southern Europe before the crisis.

Indeed, the Milan stock market's capitalization is down almost a third since 2002, the only major European bourse to lose value. Even Spain's stock market capitalization is up nearly 56%, according to research by Italian merchant bank
Mediobanca.

Executives at healthy companies worry that Italy's precarious situation will hurt the initial price and make for volatile trading later, bankers say. And the strongest can raise financing relatively easily on bond markets, without the risk of seeing their stock price veer up and down with Italy's travails.

"Even in a volatile market like Italy, there is no lack of money for the right deal," says Francesco Rossi Ferrini, senior country officer for J.P. Morgan in Italy.

Milan stock market officials have strained to lure companies into going public, launching training courses for small- and medium-size companies to train them on how to go public or sell a stake to private-equity funds. But none of the 63 companies enrolled since the launch of the plan last year has either sold to a fund or gone public. A spokeswoman for Borsa Italiana—a unit of
London Stock Exchange Group
PLC—said it is still too early to see results.

"The attractiveness of the Italian stock market is modest," said Umberto Nicodano, a partner in leading Italian law firm Bonelli Erede Pappalardo. "The boost it can offer to companies looking to go to the next level is limited."